B.p Marsh Regulatory News (BPM)

14th February 2023

B.P. Marsh & Partners Plc

("B.P. Marsh", the "Company" or the "Group")

Trading Update

B.P. Marsh & Partners Plc (AIM: BPM), the specialist venture capital investor in early stage financial services businesses, is pleased to provide the market with an update on trading for the Group's financial year ended 31 January 2023.

Highlights

· NAV increase to £179.8m as at 31 July 2022 (31 January 2022: £166.6m) and the Group remains positive regarding its ongoing performance and the outlook for the insurance market

· Previously announced Interim Dividend of 1.39p per share (£0.5m) to be paid on 28 February 2023 to all Shareholders on the Register on 27 January 2023

· Commencement of Share Buy-Back programme as announced on 16 January 2023

· Group cash and treasury funds of £12.1m at 31 January 2023 (31 July 2022: £14.1m)

· 60 new business enquiries in the year to 31 January 2023 (year to 31 January 2022: 48)

· The UK accounts for 34% of the underlying revenues of the Group's Investee Companies, on a look-through basis, with 66% originating from Overseas

Net Asset Value

One of the Group's key financial objectives is the delivery of long-term growth in Net Asset Value. The Group's interim results to 31 July 2022 showed an increase in Net Asset Value to £179.8m (31 January 2022: £166.6m; 31 July 2021: £155.0m), producing an 8.5% return to shareholders (including the payment of a dividend) in the six month period to 31 July 2022. The Group remains positive regarding its ongoing performance.

Dividend and Share Buy-Back

Interim Dividend

As announced on 16 January 2023 the Group will be paying an Interim Dividend of 1.39p per share on 28 February 2023 to all Shareholders on the Register on 27 January 2023.

It remains the Company's aspiration to pay a dividend of at least £1.0m in aggregate for its year ending 31 January 2023, subject to the Board's right to recommend an increased or decreased Final Dividend, for example in the event of significant realisations or capital commitments of the Company.

The Board will annually revisit the frequency of dividend payments for subsequent years as it reviews the cash requirements of the Group.

Share Buy-Back Programme

Alongside the announcement on 16 January 2023 regarding the proposed Interim Dividend, the Group also announced that it would begin a Share Buy-Back Programme to reduce the discount to Net Asset Value at which the Group's Shares are trading.

The programme will be subject to the approvals bestowed on the Company by Shareholders each year at its Annual General Meeting. The Group intends to undertake buy backs when the discount to Net Asset Value is greater than 20% and a maximum aggregate consideration of £1.0m has been set aside for this purpose.

Currently the Group has purchased 15,276 shares that are being held by the Company in Treasury. It is the intention of the Group to continue to execute the Share Buy-Back Programme when possible.

Investee Company Highlights

During the year to 31 January 2023, the majority of the Group's investee companies have continued to perform well and adapt to the economic challenges facing the UK and the rest of the world.

The Group's mantra of working closely with the Management Teams of our respective investee companies continues to contribute to long-term growth.

Kentro Capital Limited ("Kentro")

Kentro's performance remains strong across both Nexus Underwriting Limited ("Nexus"), the MGA business, and Xenia Broking Group ("Xenia"), the broking business. Kentro is now a leading independent speciality MGA and trade credit & financial risks insurance broker.

Nexus is one of the 10 largest MGAs globally and one of the top three MGAs outside the USA. Nexus has c.800 broker and 40 insurance carrier relationships. Xenia is the UK's largest independent trade credit broker. Combined, Kentro offers risk services across 19 speciality classes of business in nine countries.

Since 2014, run-rate adjusted EBITDA has grown by over 6x to c.£21m with Kentro producing an EBITDA margin of over 33% over the past three years. Year on year EBITDA has also increased by 14% to more than £18m in 2022.

On 5 December 2022, Kentro agreed the conditional acquisition of Linda Scott, an independent Trade Credit broker based in Glasgow. This acquisition was undertaken via Xenia and represents Xenia's tenth acquisition in three years.

Established in 1991 by Linda Scott, the team are well respected and highly regarded in the industry and now manage a portfolio of 40 clients.

Linda Scott's product offering and client base complements Xenia's existing business, whilst the hire of an experienced Trade Credit team in Glasgow will help to support new business generation in Scotland.

XPT Group LLC ("XPT Group")

Post year-end, and as announced on 6 February 2023, the Group lent XPT Group a further $6m (£4.9m), via a short term $2m Revolving Loan facility and a $4m Term Loan. These facilities were drawn down in full by XPT Group on completion.

XPT Group has utilised these funds to acquire Cal Inspection Bureau Inc ("CAL"), a California based physical inspection company that carries out surveys and inspections of sites, on behalf of insurers and insurance intermediaries. CAL was established in 1988 by its founder and president Emil Moskowitz, who has joined Platinum Specialty Underwriters ("Platinum"), a subsidiary of XPT Group, as part of this acquisition.

CAL is widely regarded as the premier underwriting survey and audit business on the west coast of the USA, working with almost every MGA and wholesale broker in their territory. With CAL as part of Platinum, the goal is for CAL to become the premier underwriting survey and audit business throughout the USA.

XPT Group sees the services offered by CAL as a natural adjunct to Platinum's current wholesale channel business model, with Platinum being able to offer physical inspection services alongside other third-party claims adjusting administrator offerings.

The acquisition of CAL is XPT Group's 13th acquisition since formation.

XPT Group's performance since its inception has been impressive, with the business producing Gross Written Premium of over US$500m in its financial year ended 31 December 2022 (2021: US$400m). XPT Group is projecting strong growth during 2023, both via its continued acquisition strategy and underlying organic growth.

Lilley Plummer Risks Limited ("Lilley Plummer")

The Group continues to be pleased with the performance of Lilley Plummer. Lilley Plummer's EBITDA has seen similarly impressive gains over the prior year having increased over 4-fold, from c.£0.4m to c.£2.0m in 2022.

The growth of Lilley Plummer over the last year is attributable largely to diversification into different classes of business.

Most recently this included the hiring of a new team which specialises in North American Property business. Over the course of 2023, Lilley Plummer will continue to look at new opportunities, whilst continuing to support organic growth across its core marine offering.

Stewart Specialty Risk Underwriting Ltd ("SSRU")

Performance of the Group's Canadian investment, SSRU, remains a highlight:

· In SSRU's year to 31 December 2022, Gross Written Premium exceeded CA$75m, representing an over 50% uplift on prior year results

· A similar trend was seen in EBITDA, with SSRU achieving over CA$7m in 2022, a 51% increase over the prior year

Growth continues to be achieved via organic growth across its existing commercial casualty and property book and makes SSRU one of Canada's largest MGAs.

Agri Services Company PTY Limited ("Agri Services")

The performance of Agri Services, one of the Group's Australian investments, remains strong.

Since the Group's initial investment into Agri Services in July 2019, the company has undergone considerable growth:

· Gross Written Premium has increased from c.AU$5m in 2019 to over AU$40m in 2022

· EBITDA, in the same time frame, has seen an increase from c.AU$0.3m to over AU$1.1m

ATC Insurance Solutions Limited ("ATC")

Another of the Group's Australian investments, ATC, continues to exhibit impressive growth with gross written premium at c.AU$132m at ATC's 2022 year-end, over 40% higher than the 2021 year-end position. ATC's EBITDA has seen similarly impressive growth since the prior year, having increased by over 45% to c.$AU9.2m.

Liquidity and Loan Portfolio

Group cash and treasury funds were £12.1m at 31 January 2023 (31 July 2022: £14.1m).

Between 31 July 2022 and 31 January 2023, the Group provided loans to the investment portfolio of £2.8m, including £1.5m to LEBC Holdings Ltd to make a strategic acquisition, £0.7m to Agri Services, and £0.4m to Denison and Partners Ltd to support further organic growth.

The Group has also received £0.4m in loan repayments since 31 July 2022 and its loan portfolio balance was £11.5m at 31 January 2023 (31 July 2022: £9.2m).

Post year-end, and as announced on 6 February 2023, the Group has provided loans totalling US$6.0m (£4.9m) to XPT Group, following which the Group's current liquidity, comprising group cash and treasury funds, is £7.2m and its aggregate loan portfolio is £16.4m.

The Group is debt free.

New Business Opportunities

The Group remains focussed on sourcing new business and has an active pipeline of new business opportunities which are currently being considered.

B.P. Marsh is well-known in the financial services (sub)sector in which it specialises, with a focus on Insurance Brokers and Managing General Agencies. The Group continues to focus on investing in niche SME sectors backed by experienced and capable management teams, which will create long term growth and consequential value.

Continued M&A activity at the larger end of the insurance market can generate opportunities at the smaller end of the market, many of which meet the Company's investment criteria.

As such, the Group continues to see a high number of potential new business opportunities, having received 60 new business enquiries in the year to 31 January 2023, increasing from 48 received enquiries in the preceding year. In view of the Group's favourable cash position, we therefore remain prepared to take advantage of this phase in the insurance cycle.

Current opportunities under consideration include (but are not limited to) the following:

· a start-up MGA/underwriting agency, looking to specialise in underwriting marine lines,

· an established broker, that specialises in insurance for High Net Worth clients and Fine Art & Specie lines, and

· an established MGA that specialises in professional and management liability lines for the North American insurance sector.

Insurance Market Outlook

The insurance market has seen five years of constant rate increases across most lines of business, with the pace of these increases slowing somewhat over the past four quarters.

Accordingly, there have been various market discussions regarding the longevity of these price increases, given the slowing of rate increases over 2021 / 2022. Nonetheless, there has been no drastic downward change in rates, with the decline taking longer than the market expected.

Additionally, there have been various macro-economic challenges facing the insurance market since Covid-19, such as the Russian conflict with Ukraine, increased interest rates, inflation, and recent cat events (such as Hurricane Ian).

The effect of these challenges has increased costs for the insurance market, with the impact developing in different ways, varying by business lines and region. In the short to medium term, the Group believes that such market conditions will slow any downturn in rates, given the increased costs for the insurers.

This is especially the case in sectors with cat-exposure, where underlying capacity is restricted. As an example, the Marine market has seen some relatively flat pricing over the last six months. Despite this, increases in reinsurance costs have occurred, which may well lead to pricing increases across 2023.

Overall, whilst this is not a complete picture of how the insurance market will develop over the course of 2023, the Group does not foresee a return to soft market conditions in the near future.

Commenting on the Group's performance, Dan Topping, B.P. Marsh's Chief Investment Officer stated:

"It has been good to see the majority of our portfolio produce substantial growth over the financial year to 31 January 2023, and I am confident that the Group's full year results will be in line with historical performance.

"Moving forward into our new financial year, the Group is cash resourced and well positioned to pursue its solid pipeline of new investment opportunities and potential development opportunities within the current portfolio. Accordingly, I remain confident about B.P. Marsh's development over the next 12 months."

Full Year Results

The Group expects to report the full year results for the year to 31 January 2023 on 13 June 2023.

For further information:

Notes to Editors:

B.P. Marsh's current portfolio contains fifteen companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for approaching ten years.

- Ends -